Sovereign default in the eurozone is a real possibility

As EU officials meet in Brussels to discuss market fears that debt contagion will spread to Italy, Prof Philip Booth, Editorial and Programme Director at the Institute of Economic Affairs, said:

"It is not inevitable that the EU debt crisis spreads to Italy but the long-run economic fundamentals there are poor. Economic growth is very slow and will not improve unless there is radical economic reform - which looks unlikely. As such, the debt burden is unlikely to fall and, if the Italian government cannot service the debt, the EU will discover what has been clear all along: we cannot simply repackage bad debts in the hope that they will go away.

"Sovereign default in the eurozone will become a reality that cannot be ignored. Unlike with Greece, there are no pockets deep enough in which to hide Italian bad debt."

Notes to editors

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.

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